Investors, I read about a legal battle making its way through California’s courts. The dispute centers on a luxury property in Malibu.
The buyer paid $12.7 million for a Tuscan-style mansion in 2007. The buyer thought the property covered 15,000 square feet. Two years later he wanted to extend the property only to discover that official records listed the property as less than 10,000 square feet. That’s one heck of a shortfall on square footage.
The article mentions that lawyers and brokers in the area are “mystified” as to how the buyer and his agent didn’t notice that missing 5,000 square feet. So am I. I can’t help but wonder why the buyer didn’t measure the property before he parted with his cash. It’s a lot quicker, easier, and cheaper to pay someone to do that than to engage in a lawsuit.
Real Estate Square Footage
Over the years, I’ve viewed properties across Central and South America, Mexico and the Caribbean. I’ve learned that square footage is counted in very different ways from market to market.
You might think that with a 1,000-square-foot condo you get 1,000 square feet of interior living space. Not so. In some markets, they count uncovered patios, balconies, yards, and even garages. Storage space that isn’t inside the unit is often thrown in. I’ve even heard of situations where the condo’s square footage included the unit’s allocated parking space.
Sometimes the “interior space” includes the property’s share of common hallways, entrance foyers, and other shared space. This isn’t living space, obviously.
In some markets the square footage is calculated from the outside wall. In others, it’s from the inside wall. It may not seem like much, but all those extra inches do add up. Estimating The Value of International Real Estate can be challenging with the different methods or customs for counting square footage.
Real Estate Listing & Square Footage
On one occasion, I found a ground-floor condo with a killer asking price. It looked like a steal. The price was around half the average per square foot price for similar condos in the same neighborhood. But when I investigated more closely, it didn’t look so hot.
The square footage included a shared outside space that wrapped around the condo. The seller assured me that “nobody else ever used it” so it was private. When I checked the public registry, it showed that the outside space was a common area. It wasn’t included in the registered square feet of the condo. Without that additional space, the condo went from a killer deal to a frankly average price per square foot for the neighborhood.
I’ve also seen property that’s genuinely larger than listed in the public registry. That’s because the sellers extended their property without getting approval or permits to do so. In one case, local laws restricted the maximum size of a home. The seller’s home was already at the maximum permitted size. He still went ahead and added an extra bedroom and bathroom. The risk here is that local authorities could force you to tear down the additions or hit you with a big fine to regularize them.
The point is, you need to know the true square footage of the property you’re looking at and how it’s calculated. That’s the only way you’ll get an accurate idea of the price per square foot to help you figure out if you’re getting a bargain or paying over the odds for your property.
3 Tips For Winning the Square Footage Game
Here’s how it works out. Take a neighborhood where the price is $200 per square foot. You buy a condo that’s listed as 1,000 square feet, so you pay $200,000. But you then discover that the condo’s only got 800 square feet. You just paid $250 a square foot for that condo. That will hurt when it comes to selling the condo on.
My top three tips for winning the square footage game are:
#1. Take a Tape Measure. Never rely on the seller or agent telling you a property has so many square feet. If you’re interested in purchasing it, get a tape measure out and measure it yourself. Missing square feet gives you wiggle room to negotiate. You can of course opt for the latest technology such as laser devices to measure the space. But a tape measure works just as well. An architect can also carry out this step for you.
#2. Get a Survey. This is hugely important when buying a larger home or a land parcel. The survey will fix the boundaries and determine exactly how much property you’re getting. That way, you pay based on what’s actually there.
#3. Check the Public Registry. The square footage is all there in black and white in the property’s deed. Your attorney can check this for you. If the square footage doesn’t tally with what the seller tells you, find out why. And if it comes down to unpermitted additions, I’d ask the seller to get those approvals and permits in place before closing.
You’ll note I haven’t listed an obvious alternative: getting an appraisal done. That’s usually easy back home but not so in many markets overseas. You’ll often struggle simply to find an appraiser, never mind one that’s independent.
Calculating the square footage of your home before you sign on the dotted line helps you two ways. It gives you a better chance of paying fair market value which will help boost your potential gains when you sell the property at a later date. And it cuts out the need for expensive litigation when you discover your dream home isn’t quite as large as promised.
Ever come across a listing in the States or Overseas that the actual square footage was much different then the deed or listing? Comment below